FAQ 618: Allocations--Employer contribution of 7% shows allocation of more than 7%


I want a contribution equal to 7% to go to each employee. It is calculating a contribution higher than 7%. What am I doing wrong?


The issue with the case has to do with 1) how ASC allocates calc'd contributions and 2) TH minimums offset by safe harbor ER sources. The first thing the system does is determine the 7% contribution. When it goes to allocate it, however, it also looks at TH minimums and their offset by other sources.

Although your plan has a safe harbor ER contribution of 3% of pay to offset the TH min, this source is coded to go to all ee's, including terminees and those with <1000 hours. The TH min is coded to go to only ABC's who work at least 1 hour in the plan year. Two participants fall into the SH category, but only one falls into the TH category. The system is attempting to allocate the differential between these two amounts, since it has to account for all required contributions.

Because the SH source takes care of the TH min, the easiest way around this anomaly is to change the TH minimum percent on the top heavy minimum definitions screen in the plan specs to be 0 or blank. When you rerun calcs, it will allocate exactly 7% because it is no longer trying to adjust for the differences%